SEBI has reiterated that any delay of one day or shortfall of ₹1 in repayment (principal or interest) from the scheduled repayment date is to be classified as a default unless the debt instrument has been rescheduled by lenders before the due date. This definition remains unchanged as per the SEBI (Credit Rating Agencies) Regulations, 1999.
The provision on post-default curing periods allows CRAs to upgrade ratings from default to non-investment grade after 90 days of regularized payments, subject to satisfactory performance. However, CRAs may deviate from this timeline on a case-by-case basis if a detailed policy addressing such deviations is placed on their website. These deviations must be reviewed biannually by the Ratings Sub-Committee of the CRA’s board.
In certain cases where non-payment arises due to factors beyond the issuer's control, such as incorrect investor account details or account freezes ordered by government authorities, CRAs are required to confirm the issuer's availability of funds and verify the reasons for payment failures. Issuers must deposit the required amount into a designated escrow account on the due date to avoid classification as default.
To ensure transparency, CRAs must provide details of such payment failures, including the security name, ISIN, due amount, payment made, and reasons for failure, to stock exchanges, depositories, and debenture trustees. This information must also be disseminated on their respective websites.
The term "technical default" has been removed from Para 15.3 of the Master Circular. Policies for upgrading ratings post-default now focus on significant changes in credit risk profiles due to management changes, acquisitions, regulatory actions, or inflow of long-term funds.
This circular is effective immediately and aims to protect investors’ interests and ensure uniform application of policies across CRAs. It is issued under Section 11(1) of the SEBI Act, 1992, and Regulation 20 of CRA Regulations. For more details, visit the SEBI website.
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